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Rothaermel Exercise 1
Lisa D. Bailey
Liberty University
BUSI 690 – B02
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Rothaermel Exercise 1
Chapter 1
Consider the brief description of Target’s stakeholder relationships and combine
that information with your experience shopping in a Target store. How might Target’s
stakeholders, in particular its employees, customers, local communities, and suppliers,
influence the manager’s decisions about building competitive advantage in the analysis
stage of the AFI framework? How might Target gather information from its stakeholders
to inspire a better customer experience in the formulation stage in order to differentiate?
Or in order to lower costs? Brainstorm by jotting down as many ideas as you can think of
about how key stakeholders may affect or be affected by the implementation stage.
Within the AFI framework, which involves the three tasks of Analyzing, Formulating,
and Implementing, Target employees, customers, local communities, and suppliers could
influence the manager’s decisions about building competitive advantage in the following ways.
First, the manager must identify these stakeholder’s needs and analyze them in order to identify
the ways to meet those needs. A manager could specifically focus on employees as stakeholders
and resolve any issues that the employees deal with and seek ways to engage the employees,
resulting in increased employee motivation and retention. Lastly, specific to the customer
stakeholders, a manager should always consider customer feedback to constantly evolve the
business strategy to continue to meet customer needs.
Target can gather information from stakeholders through a variety of methods including
observation, surveys, interviews, and possibly focus groups. These stakeholders can affect the
implementation stage in a variety of ways. Employees can resist change and become
disengaged. Customers and the local community can voice their resistance to change by using
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social media and other avenues to complain and can elect to take their business to competitors.
Suppliers can increase material prices or elect to discontinue the business relationship.
BP’s experience in the Gulf of Mexico has made it the poster company for how not
to manage stakeholder relationships effectively (see Strategy Highlight 1.2). What advice
would you give to BP’s managers to help them continue to rebuild stakeholder relationships
in the gulf region and beyond? How can BP repair its damaged reputation? Brainstorm
ways that top management might leverage the experience gained by reactions in the gulf
and use that knowledge to motivate local managers and employees in other locales to build
stakeholder relationships proactively so that BP avoids this type of negative publicity.
In order to rebuild the BP brand and reputation, BP should commit to communicating to
their stakeholders in an honest, clear, and transparent manner. This act of building trust is crucial
to rebuild relationships and will only improve over time and consistency to that commitment to
integrity. BP should seek partnerships with other businesses and civil organizations within the
Gulf community to further instill their commitment to support the community and do business
responsibility.
In addition to the rebuilding of brand efforts, BP can develop and implement an ethics
policy company-wide that incorporates a way for employees to report issues early on and allow
the leadership to course correct and avert crisis.
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As noted in the chapter, research found that firm effects are more important than
industry effects. What does this mean? Can you think of situations where this might not be
true? Explain.
Firm effects are performance that are attributed to actions managers take. Industry
effects are performance that are attributed to the structure of the industry in which the company
competes. Firm effects are more important that industry effects because profitability depends
more on the way an organization in ran than the external factors of the industry.
Industries that are highly government regulated could be an example of a situation which
industry effects could be more important than firm effects because regulations can hamper the
profitability of the organization.
Chapter 2
Identify an industry that is undergoing intense competition or is being featured in
the business press. Discuss how scenario planning might be used by companies to prepare
for future events. Can some industries benefit more than others from this type of process?
Explain why.
For the sake of this question, I’ll use the pharmaceutical market as the industry that does
not only face intense competition but is also highly criticized in the American media due to the
drug costs consumers are charged. Scenario planning would be beneficial in to pharmaceutical
firms to access the overall effects to their brand and profitability. The competing demands of a
pharmaceutical firms stockholders and those of consumers provide opportunities for the firms to
become industry leaders or to be susceptible to rival companies. Pharmaceutical companies can
use scenario planning to forecast for potential impact of increased costs for distribution,
government regulatory changes, working to educate customers, and more. The scenarios with
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the highest probability of occurring should be identified and strategies defined on how to cope
with the scenarios.
Scenario planning is more beneficial to industries where the business environment can
change rapidly and where they are highly sensitive to external factors.
Chapter 3
Why is it important for any organization (firms, nonprofits, etc.) to study and
understand its external environment?
Organizations should study and understand its external environments to apply non-market
strategies, determine economic strategies, understand market trends and determine the best
products / services for customers, stay abreast of innovations in technology, commit to corporate
social responsibilities within the community, avoid legal issues, determine any opportunities and
threats, and gain competitive advantages.
How do the five competitive forces in Porter’s model affect the average profitability
of the industry? For example, in what way might weak forces increase industry profits, and
in what way do strong forces reduce industry profits? Identify an industry in which many
of the competitors seem to be having financial performance problems. Which of the five
forces seems to be strongest?
Threat of New Entrants: New competitors introduce to capabilities and offerings to the
market, helping leverage current capabilities and contributing to overall market success.
Bargaining Power of Suppliers: Suppliers can fix prices based on their profit if materials
are available from a smaller pool of suppliers which limits the buyer’s options to go to
competing suppliers. The bargaining power of suppliers ensures materials are high quality and
ensure the industry remains profitable.
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Bargaining Power of Buyers: Buyers have lots of options when buying. This is profitable
for the industry because it can lower the overall cost of the products or services, increase
transactional sales which then makes the industry more liquid.
Threat of Substitutes: Affects the profitability of the industry in a negative manger
because the substitutes will dilute the market.
Rivalry Among Competitors: Affect the profitability of the industry negatively because
competitors attempt to overtake one another and create an unfavorable trading environment.
The telecommunications industry seems to have many competitors within the industry
struggling with financial performance due to the agile innovation in the Internet of Things (IoT)
that has become critical. Telecommunications is no longer simply telephones as the younger
generations rarely use their phones for talking. The greatest force seems to be the threat of new
entrants in the form of companies that were never considered to be telecommunications that are
breaking into the industry with new technology, products, and services.
Chapter 4
Why is it important to study the internal resources, capabilities, and activities of
firms? What insights can be gained?
It is important to study internal resources to help an organization prepare and execute
business strategies and objectives. Capabilities need to be studied in order to prepare business
objectives and strategies. Activities are the unique business processes specific to an organization
and studying those help an organization provide the best products / services to their customers.
Insights to be gained by study of these help an organization prepare and execute business
strategies and objects while also helping the business gain competitive advantages over their
competitors.
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Conduct a value chain analysis for McDonald’s. What are its primary activities?
What are its support activities? Identify the activities that add the most value for the
customer. Why? Which activities help McDonald’s to contain cost? Why?
Value Chain Analysis
Primary Activities: Inbound logistics, operations, outbound logistics, marketing and sales,
and service
Support Activities: Firm infrastructure, human resource management, and technology
development
The activities that add the most value for the customer are inbound logistics, services, and
firm infrastructure. The activities that help McDonald’s contain costs are technology
development and logistics.
In the past few years, McDonald’s has made a lot of changes to its menu, adding
more healthy choices and more higher-priced items, such as those offered in McCafé (e.g.,
premium roast coffee, frappé, and fruit smoothies), and has also enhanced its in-restaurant
services (e.g., free, unlimited Wi-Fi; upgraded interiors). Did McDonald’s new priorities—
in terms of a broader, healthier menu and an improved in-restaurant experience—require
changes to its traditional value chain activities? If so, how? Try to be as specific as possible
in comparing the McDonald’s from the recent past (focusing on low-cost burgers) to the
McDonald’s of today.
Yes, McDonald’s is offering more traditional value chain activities and are promoting
their commitment to the health of their customers which is a reinvented, more socially
responsible McDonald’s. Furthermore, they recognize their customers are on the go and choose
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their restaurant for their speed. Adding free Wi-fi caters to the customers who visit the
restaurants and allowing those customers stay connected while they are at McDonald’s.
The resource-based view of the firm identifies four criteria that managers can use to
evaluate whether particular resources and capabilities are core competencies and can,
therefore, provide a basis for sustainable competitive advantage. Are these measures
independent or interdependent? Explain. If (some of) the measures are interdependent,
what implications does that fact have for managers wanting to create and sustain a
competitive advantage?
The four measures in the VRIO framework (Valuable, Rare, Imitate, and Organized to
capture value) are interdependent to one another in nature. A resource is only valuable if it is
rare, difficult to imitate, and creates value. Managers that want to create competitive advantages
must use the VRIO framework to calculate if the resource passes the measures and thus is a
competitive advantage.
Chapter 5
Small Group Exercise 1 – Balanced Scorecard
Liberty University Business School
How do customers view us?
Customers of the business school would be students or prospective students. They view
LU Business School as a service that will allow them to learn the necessary business knowledge
that will improve their business skills and expertise and will make them more attractive to
companies as employees and leaders.
The companies that hire graduates from the business school are not direct customers but
could view the school as a supplier of resources (the graduates).
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How do we create value?
Liberty University Business School creates value by transforming students into graduates
that are skilled and knowledgeable business professionals.
What core competencies do we need?
The business school needs the technical competencies to teach the skills necessary and
the administrative competencies to manage the student needs and the administrative needs to
ensure the courses are designed and taught appropriately.
How do shareholders view us?
Shareholders view the school as an investment into our society as a whole.
Small Group Exercise 2 – Elevator Speech
Economic performance is important to every business to stay profitable and experience
growth. Operating with efficiency and economy with socially accepted principles and long-
surviving ethics is important so that all company stakeholders are able to feel confident in their
affiliation with the organization. Profitability is key to continued operations as well as
continuing to bring return on investment to owners but that cannot be the only goal if business
hopes to remain not only competitive within their industry but also relevant to customers.
Corporate social responsibility is an important factor in a company’s success and it calls for a
triple-bottom-line approach to ensure strong economic performance. Triple-bottom-line, or the
3P’s of profit, planet, and people is an approach where profits benefit the society overall and
does not measure success as just revenue. The commitment to be socially and environmentally
responsible as a business ensure that the business operates in a manner that includes eco-friendly
processes and considers the welfare of the community in which the business operates. A triple-
bottom-line approach respects the future of our children and our planet while remaining
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financially profitable. Starbucks is a good example of a company that practices the triple-
bottom-line approach by ensuring production and procurement of materials is done ethically and
environmentally through its value chain.
